Local news

During last week, Oman’s ten-year bond mid-yield fell sharply to 5.062 per cent, its lowest reading ever recorded. The US Fed maintained its current policy rates as announced in the previous week, and is expecting no change in 2020 citing the US presidential elections and other trade war related uncertainties as key reasons.

The Central Bank of Oman’s foreign assets as at the end of October 2019 stood at RO6.26bn, having contracted by 3 per cent month-on-month. The assets are still 3 per cent up on year-on-year basis but are below the trailing twelve month (TTM) simple average of RO6.38bn. These assets include bullion, IMF reserve assets, placements abroad and foreign securities.

Nama Holding and State Grid International Development Limited (SGID) signed an agreement for the sale of 49 per cent stake in Oman Electricity Transmission Company (OETC), during a ceremony held in Muscat, Oman on December 15. The deal is valued at about US$1bn, resulting in an implied valuation of about US$2bn for OETC, and is expected to be completed in early 2020. It is a landmark deal for Oman as it embarks on asset sales of governmentowned entities to plug one of the largest budget deficits amongst oil exporters. The deal is also a sign of China’s rising interest in the Middle East amid plans to increase the nation’s political clout and revive ancient trading routes under its ‘One Belt, One Road’ initiative. OETC owns and operates the nation’s main transmission network. The company, which is a subsidiary of Nama Holding, posted profits of RO23mn for the first half of 2019, compared with RO17mn for the same period last year, as per the information on its website.

GCC markets

Within the GCC financial markets, Saudi stock exchange was the best performer during the week up by 3.57 per cent while the MSM30 index was the only loser.

Shares in Saudi Aramco fell on Tuesday, losing ground for the first time since the oil giant’s record initial public offering, and ahead of the stock’s inclusion into the MSCI Emerging Markets Index and Tadawul All Share Index (TASI). Index compiler MSCI said last week Saudi Aramco would have an estimated weight of 0.16 per cent in its emerging market index and an estimated weight of 6.03 per cent in the MSCI Saudi Arabia Index. On Wednesday, the stock was included in TASI, with 12 per cent weight, the second-largest after Al Rajhi Bank at about 14 per cent. The stock ended the week up by 10.9 per cent since its IPO last week. The stock will also be included via an accelerated process in gauges compiled by FTSE Russell and S&P Dow Jones indexes this month.

During the week, Moody’s changed the GCC, Turkey and South Africa’s non-financial corporates’ 2020 outlook to negative. The key drivers for the negative outlook are combination of slowing economic growth, heightened geopolitical risk and policy unpredictability. For the GCC, the company cited slower non-oil GDP growth, volatile oil prices to limit governments’ ability to fund growth initiatives.

Saudi Arabia’s National Commercial Bank ended talks with Riyad Bank to merge after a year of talks. The two sides could not agree on a valuation, according to a person with knowledge of the deal. The merger, if it had happened, would have created a bank with US$200bn in assets. Riyad Bank’s shares have gained 23.61 per cent this year, and National Commercial Bank has increased 5.54 per cent. That compares with an increase of 4 per cent for Saudi Arabia’s benchmark stock index. The Public Investment Fund, Saudi Arabia’s sovereign wealth fund, owns 44 per cent of National Commercial Bank and about 22 per cent of Riyad Bank.

Qatar announced the biggest budget in five years, and expects a smaller surplus. Budget 2020 of QR210.5bn (US$58bn), up 1.9 per cent from 2019 and the highest spending in the past five fiscal years. Revenues in 2020 are expected to stay unchanged at QR211bn, based on an oil price assumption of US$55 per barrel. As a result, the country expects a surplus of QR500mn next year compared with a surplus of QR4.4bn this year.

Qatar’s economy was hit hard in the first months of a boycott imposed on Doha by neighbouring countries in mid2017 in a row over security issues. But it has used some of its vast financial reserves to protect its banks and boost economic growth. For next year, the gas-rich state plans to spend QR90bn on major projects, a 0.6 per cent increase, with infrastructure accounting for the largest part of project spending. It plans to award new projects worth QR11.5bn next year.

Recommendation

Investors are advised to look at the performance of companies and read the general budget figures, which shall be announced soon and not to let the movements of foreign investors affect their investment strategies. Generally, the end of the year sees moves by international portfolio managers to improve performance and close investment positions, which in turn affects market performance.

Regionally, the preliminary figures for public budgets constitute a real catalyst for the markets, especially since the preliminary figures indicate the continuation of the expansionary trend of the region’s governments.

Globally, uncertainty still surrounds several major factors that affect the performance of global markets, and the upcoming holiday season will accelerate the movements of large investors.